Note for IBA 350 with Professor Turner at UA-Intro World Business (4)
Note for IBA 350 with Professor Turner at UA-Intro World Business (4)
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Date Created: 02/06/15
CHAPTER EIGHT REVIEW MATERIALS Many of the political forces with which business must cope have ideological sources But there are a large number of other sources that international managers must understand and cope with including nationalism terrorism traditional hostilities unstable governments international organizations and government owned businesses Such names as communism socialism capitalism liberal conservative left wing and right wing are used to describe governments political parties and people These names indicate ideological beliefs Hence the political climate of a country is just as important for business as the country s topography natural resources and meteorological climate A government s instability can lead to little economic development and that is bad for a company considering going into that particular country So government instability can cripple a country s business opportunities even if they have every other natural resource etc Remember also that Laws their interpretation and enforcement do re ect political ideologies In business we must understand these laws and how they might affect our international business Stable governments usually indicate good business prospects Profit is not a dirty word It is the goal of Capitalism and not Communism or even Socialism normally However international companies do have a social responsibility to other nations in which they do business and should not be totally focused on pro tability COMMUNISM The belief that the government should own all major factors of production The government controls everything including labor unions etc Indeed if a country turns to communism the government will con scate take over all private businesses they do not pay the companies for them CAPITALISM An economic system in which the means of production and distribution are for the most part privately owned and operated for private pro t Ideal Capitalism is when all factors of production are privately owned and the government performs only those functions the private sector cannot perform such as national defense police and re protection etc SOCIALISM This type of government advocates government ownership or control of the basic means of production distribution and exchange Pro it is not an aim Some countries such as Singapore call themselves Socialist but in reality they are aggressively Capitalistic Socialism varies from country to country very much Even European countries such as the UK France Spain Greece and Spain have tried various forms of Socialism as governments CONSERVATIVE A person group or party that wishes to maximize private ownership and business and minimize government activities Truly in the USA the term Conservative does indicate an individual who wishes to minimize government activities But in Russia and China the description of an individual as Conservative has an entirely different meaning as to what it means in the USA So be careful to be sure you as an international executive clearly understand the definitions Right ng is a more extreme Conservative position A Left Wing government seeks more power than a Right ng government and seeks higher taxes than a Right ng government Remember that the terms left and light have political meanings related to Liberal and Conservative viewpoints LIBERAL In the contemporary USA a person group or party that urges greater government involvement in business and other aspects of human activities Left ng is a more extreme Liberal In political terms in Western Europe the description of a person or political party as Liberal frequently has different mean than it has in the USA Be careful because terms used in the USA may not have the same meaning outside the USA In some countries firms are nationalized taken over by the government for several reasons Normally however it is a bad economic move by governments to nationalize businesses Companies that are privately owned argue that when they are competing in countries where the government owns similar companies that the government has a competitive advantage because they can cut prices remember they are not interested in pro t hold down wages etc Remember that government owned factors of production do not alwavs have profit as a main obiectivel PRIVATIZATION The transfer of public sector assets to the private sector the transfer of management of state activities through contracts and leases and the contracting out of activities previously conducted by the state Britain primarilv pioneered bv Prime Minister Margaret Thatcher is the acknowledged leader of the privatization movement bv governments Privatization has become a worldwide movement and trend all over the world including in China Buyers of privatized companies have generally done very well financially Banking solvency and even stability is improved by privatization in all countries Nationalism and ideological beliefs are very important to the conduct of some countries in which we do international business If we as executives suspect that the trend is towards more nationalism most likely we will not invest in that particular country Countries that the USA government believe f39mance and train terrorists include Iran Syria and N01th Korea Hopefully this will be changing Kidnapping for ramson is practiced rather often in some countries such as Columbia Peru and Venezuela in the past USA Executives practice commando management to avoid kidnap risk Companies can get Insurance to cover ransom payments and rms have been established to deal with terrorists who have kidnapped business executives They do recommend and basically insist that they do the negotiating for the release of the victimno one else involved Terrorist groups have often been dissatis ed and frustrated with existing social order economic order and political order in various countries Hence the conduct of such organizations Terrorism can affect politics and politicians and defrnitely businesses and business people Paying ransoms can also lead to more terrorism and kidnappings unfortunately Remember too that GovernmentSponsored Terrorism is an act of war In the USA terrorism resulted in the creation of the new cabinet level Homeland Security Department COUNTRY RISK ASSESSMENT An evaluation conducted by a bank or any other business having an asset in a country to determine the types and levels of risks These risks include 1 Political wars revolutions coups Economic Financial Labor low productivity militant unions Legal laws may be easily changed Terrorism becoming more and more of a factor for companies doing business in certain countries and must be closely monitored International business executives use Country Risk Assessment often to decide if they should do business in a particular country F EJ39PP quot
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